TRUE-FALSE QUESTIONS

1. The auditor should consider only quantitative factors when assessing the materiality of detected misstatements.

2. The PCAOB provides guidance that auditors must consider as they decide whether management's refusal to correct a detected misstatement is indicative of intentional bias.

3. The auditor is responsible for designing and maintaining policies and procedures to identify, evaluate, and account for contingencies; management is responsible for determining that the auditor has properly identified, accounted for, and disclosed material contingencies.

4. One source of evidence concerning contingencies is management; a primary source of corroborative evidence concerning contingencies is the client's legal counsel which is obtained in the management representation letter.

5. With regard to reviewing significant estimates, the auditor is responsible for providing reasonable assurance that the estimates are reasonable.

6. Auditors should not challenge management estimates that result in current-period reductions in income and associated increases in reserve accounts.

7. The audit report contains attestation covering information contained in the MD&A section of the annual report.

8. One of the key disclosures in the annual report is a summary of significant accounting policies used by the company.

9. Auditing standards recognize that there are inherent limitations in an auditor's ability to detect material misstatements relating to the entity's compliance with laws and regulations.

10. The legal implications of a company's noncompliance with laws and regulations are ultimately a matter for the auditor to resolve before the audit opinion can be issued.